Grape Broker Forecasts Favorable Demand/Prices

Clarksburg growers hear latest market trends at annual Grape Day

by Jon Tourney
clarksburg grape day
CWGVA president and grapegrower Tim Waits, Allied Grape Growers VP Jeff Bitter and UC Cooperative Extension viticulture advisor Chuck Ingels gave presentations at Clarksburg Grape Day.
Clarksburg, Calif.—California grape demand and prices will face a stable to good market until at least 2016, according to Jeff Bitter, vice president of operations for Fresno, Calif.-based Allied Grape Growers. Bitter based his prediction, which he presented March 6 at Clarksburg Grape Day, on wine shipment trends, recent grape crush figures and future estimates. Although increases in grape planting raise concerns about oversupply during the next 3 to 4 years, Bitter said a moderate statewide net increase in vineyard acreage of 15,000 new acres per year should provide a balanced market to avoid the excess supply that resulted from the previous over-planting cycle that occurred from about 1998 to 2002.

Clarksburg Grape Day is presented annually by the Clarksburg Wine Growers & Vinters Association (CWGVA) and the University of California Cooperative Extension. This year it was held for the first time at the Old Sugar Mill wine-tasting complex and event center in Clarksburg.

Armed with information from the 2012 Preliminary California Grape Crush Report, and more time to make comparisons and forecasts since Allied’s annual market report presented at the Unified Wine & Grape Symposium in January, Bitter said the record 2012 California wine grape crop of 4.01 million tons “was a blessing.” Reviewing recent wine shipment trends and future projections in relation to required tonnage, Bitter projected grape shortages for 2013 and 2014 as well as balanced supply/demand for 2015. With recent planting trends, 2016 would likely be the first year of a noticeable increase in supply as new bearing acreage comes online, and supply could be a bit long that year. Bitter observed, “We’re in a short position for the near term from one to three years. We could use another large crop, but that is unlikely for 2013, and a short crop would encourage imports.”

Overplanting a concern, caution advised
Based on Allied’s most recent nursery survey, 24 million grapevines were sold in 2012, a significant increase compared with recent years. This would translate to about 30,000 acres planted statewide. Less known is how many of the vines sold will be for replants—and how many vineyard acres are being removed. In comparison, during the late 1990s California added about 40,000 new acres per year during a three- to four-year period.

Bitter said, “A moderate planting rate of 15,000 net acres per year would provide a comfortable growth rate for the industry. If 30,000 acres are planted, that’s OK, as long as 15,000 acres are also removed.” Bitter advised, “Planting only with a contract is still very critical. Exercise caution to avoid an oversupply from 2016 going forward.”

Current price factors remain in place
Bitter listed five major factors driving prices, in increasing order of importance, that have influenced recent prices and will likely continue for at least the near-term:

5. A weak dollar that tends to thwart imports and encourage exports. Imports still increased last year due to demand, but this situation would have been magnified with a strong dollar.

4. Competition from alternative crops: Growers with ag land in the Central Valley have more crop-planting options that include higher profit crops with lower development and management costs, such as almonds.

3. Forethought by buyers: Grape buyers have needed to secure a mid-term grape supply as inventories balance during the next three to five years, which has translated into competition for existing grapes. However, Bitter observed, “Overall, grape price seems to be stabilizing based on supply and demand, and grower prices this year should start to flatten out.”

2. Re-establishment of mid-market wines ($7-$18 per bottle) following the recession. Wineries depleted inventories in response to the recession, and consumers moved down the price chain. The mid-market should remain, but this trend is starting to reverse, with sales increasing in the high-end market.

1. The overall supply “shortage”—not only domestically, but globally. Bitter cited recent short crops in Europe and a global-supply situation that is working in favor of California growers. Bitter said Chile and the U.S. are the only countries currently adding significant vineyard acreage.

Bitter summarized: “The underlying factors driving wine grape prices and that create a stable market look to be in the growers’ favor, at least for the forseeable future, but we must maintain quality grapes/wine and offer value to remain successful.” Although prices are higher today, Bitter observed, “If you take the increase in grape prices over the past two years, that has been the difference in achieving economic sustainability for many California grapegrowers.”

Clarksburg update and perspective
CWGVA president Tim Waits of nearby Lake Winchester Vineyard provided an update about association activities that include plans to hold a consumer passport-type weekend event in June to introduce new people and increase visits to Clarksburg-area wineries and tasting rooms. Waits also provided local observations on the 2012 grape-crush statistics citing favorable tonnage growth and price increases for Grape Crush District 17, which covers Clarksburg. He also said, “What gets me is that our average price per ton is still 20%-25% below the statewide average ($608 per ton for District 17 vs. $772 per ton statewide), and we know we can provide grape quality that is not only average but above average compared to the rest of the state.” He suggested, “We have opportunities for getting better prices, so perhaps collectively and individually we should be looking at a better marketing campaign and knocking on more doors.”

Chuck Ingels, viticulture farm advisor for UC Cooperative Extension for Sacramento County moderated and organized the day’s educational sessions that included updates about red blotch disease, vineyard floor management, weed control and Sacramento County’s new winery ordinance.

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